Saturday, June 20, 2009

A look at economic freedom, population growth, and the Tragedy of the Commons by Ronald Bailey at reasononline.

Hardin believed that Smith's metaphor of an invisible hand was contributing to "the dominant tendency of thought that has ever since interfered with positive action based on rational analysis, namely the tendency to assume that decisions reached individually will, in fact, be the best decisions for an entire society. If this assumption is correct it justifies the continuance of our present policy of laissez faire in reproduction." As the essay makes abundantly clear, Hardin is convinced that "rational analysis" will prove that Smith's invisible hand leads to inevitable population ruin.

In fact, several recent studies suggest that Hardin might have it backward. Under certain circumstances, there may actually be an invisible hand that leads to an optimum population....

Norton persuasively argues that Hardin's fears of a population tragedy of the commons are actually realized when the invisible hand of economic freedom is shackled. Many poor countries have poorly specified and enforced property rights. Poor property rights means that many resources are effectively left in open access commons where the incentive is to grab what one can before the other guy gets it. Norton points out that in such situations, more children mean more hands for grabbing unowned and unprotected resources such as water, fodder, timber, fish, pastures, and for land clearing. Lacking the institutional incentives to invest in and preserve resources, this drive to take as much as possible as quickly as possible leads to perpetual poverty.

The inverse relationship between wealth and fertility is quite evident, however, it will be interesting to see how prosperous countries fare as time progresses. Can a society maintain its economic strength while declining in population? More specifically, can the immense welfare commitments of Western nations be upheld by fewer and fewer young workers? An equilibrium will be reached - either by increased fertility, immigration from lands with excess youth, or a decline in benefits and entitlements.